Producers break off contract talks with actors

Payment from DVD sales, online content at heart of dispute

By

DavidB. Wilkerson

CHICAGO (MarketWatch) -- Still smarting from a protracted writers' strike that halted production of scripted primetime television shows this season, Hollywood may be one step closer to another strike, this time by the Screen Actors Guild, after producers walked out on talks related to a new contract.

After nearly three weeks of negotiations, the Alliance of Motion Picture and Television Producers said late Tuesday that talks with SAG have broken off, citing the actors' "unreasonable demands" over fees from DVD sales and online content.

The studios say the talks were "thrust into reverse" when SAG wouldn't accept terms similar to those agreed to in earlier negotiations with movie and television writers, directors and daytime actors represented by the American Federation of Television and Radio Artists. Those agreements "reflect the economic realities faced by everyone in our industry, including actors," the AMPTP said.

Early in the negotiations, News Corp.
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President Peter Chernin and Walt Disney Co.
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Chief Executive Bob Iger informed SAG leaders that the studios have no intention of making a deal with the union that breaks the pattern established with the Directors Guild of America and the Writers Guild of America, according to the daily trade magazine Variety.

In a statement, SAG National President Alan Rosenberg remarked that the AMPTP's move to break off talks is "unfortunate and deeply troubling." Rosenberg said the actors remain "committed to preserving rights that have been in place for decades and not giving the studios the right to use excerpts of our work in new media without our consent and negotiation."

SAG strike fears

Although the WGA walkout ended only less than three months ago, some observers are concerned that the actors and producers could be readying themselves for a standoff.

The current SAG contract expires June 30.

"I think there's some possibility here of a strike," said Charles Kaplan, a partner at Lowenstein Sandler in New York. Several movies have yet to get a green light to start production until there's some resolution in the SAG talks. Other films have been approved, but may be jeopardized because shooting is scheduled to start after June 30.

Unlike the writer's strike, which took a few weeks to shut down production on certain shows because scripts were already prepared, the actors may be betting that they can halt production immediately because, without them, there's little to shoot.

"They may feel like that gives them some leverage," Kaplan said of the actors' union.

A summer walkout by SAG would have the biggest effect on feature films, unlike the WGA strike, which most hampered primetime network television shows.

New media demands

As it was during the Writers Guild of America strike, new media residuals are at the heart of the SAG-AMPTP dispute.

"This deal should've been like walking into a car dealership," said Scott Witlin, an entertainment lawyer and partner at Akin Gump. "The terms on the car are 90% set -- you have options on colors, or other specific needs... but basically, this is what you're getting. In two weeks, the actors might've been able to get this deal done."

Witlin says it's hard to understand how much pull the actors think they have. "Maybe if they strike and shut the industry down for another 100 days [as the writers did], they could get some of what they want -- but I wouldn't even bet on that."

SAG wants a greater percentage of revenue from ad-supported streaming of TV shows and more money from DVD sales.

Under the deal the Writers Guild of America ratified with the AMPTP in February to end its three-month strike, writers will receive a flat residual payment during the first two years of the three-year contract. That translates to about $1,400 per year for hour-long shows and around $700 to $800 for 30-minute shows.

In the third year of the new agreement, the residual is about 2% of the gross revenue taken in by the distributor -- typically a studio or network.

The actors also want more than the 12 cents per DVD that constitutes their average residual payout.

The WGA, which had pushed for higher DVD proceeds, ended up dropping that proposal, and the Directors Guild of America, which also recently signed a new deal with the studios, didn't raise DVD as an issue.

SAG also wants a percentage of the revenue from product placements, among other items. In an era when the digital video recorder allows consumers to zip past commercials, more companies are arranging to have their products seen during the course of a movie or TV show.

Actors argue that when they perform in a scene holding a product or talking about it, such a scene essentially constitutes a commercial, and they have a right to be paid as the studios are.

SAG was going to jointly negotiate alongside another large group of actors who are part of the American Federation of Television and Radio Artists. But after some cast members of the CBS soap opera "The Bold and The Beautiful," represented by AFTRA, tried to de-certify the union in favor of possible SAG representation on a new contract, a conflict developed between the two unions.

AFTRA split from SAG on the joint negotiation strategy, preferring to work out its deal with the producers independently.

Having ended, for the moment, talks with SAG, the studios will now turn to AFTRA, which observers think will be able to work out a deal quickly, one crafted along the lines of the DGA and WGA deals.

"Everyone seems surprised that the talks have broken down," said Norman Samnick, an entertainment attorney with Bryan Cave LLP. "But I told people they'd never do a deal in three weeks. I think AFTRA will make a deal, and soon after, some time in June, SAG will sit down and make a similar deal -- the same one they could've had yesterday."

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